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Real Estate And Macro Trends: What It Means To You?

June 17, 2016

It is a well-known fact amongst real estate professionals that the status of a housing market greatly differs from place to place, including within a specific county. It can even differ just as much from one city to its nearest neighboring city or town. The health of the real estate market in city A can be terrific, while in city B next-door it is simply dreadful.

When a realtor is about to list a property, it is critical to analyze micro markets in order to determine its value. Therefore, that realtor must understand what the most important macro trends are and how they relate to the property he or she is about to list. There are three major factors involved in doing this. We shall discuss those right now.

Demographics

This is the first, and perhaps most important, macro trend – demographics. The demographic profile of the United States of America has seen some massive changes in recent years. In the past it was dominated by the Baby Boomers, who are now between the ages of 52 and 70. During that time-period they received the most attention from marketers of consumer products, this included marketers in the housing industry.

Now there has been a phenomenal shift in this trend. Millennials have taken the country by storm and now are the driving force in the economy. The ages of this group of people range from 18 to 34 and they are now the most sought-after customers. Once again the housing market is included in the trend. Millennial consumers now even exceed persons considered to be in Generation X (people aged 35 to 50,) as well as anybody beyond the age of 70. Any realtor who is selling a piece of property must have the Millennials in mind when they do so.

What Does This Mean for the Economy?

The major difference between the Millennials and the Baby Boomers lies in household formation. Back in 1960 the percentage of people between 18 and 34 were moving out on their own and were either marrying or cohabitating.

Today the percentage of people in the same age range who are still living with their parents has risen dramatically. They are not marrying, nor are they cohabitating with anybody else. This means they are NOT buying homes. Not only that but, because they are still living at home, parents are no longer downsizing their homes. So they are not buying new, smaller homes either, NOR are they selling the homes they already live in. So the pipeline of the home-selling world has seen sort of a bottle-neck affect because far fewer people are selling or buying homes.

Mortgage Rates in the Near Future

Another driving macro factor of the current real estate market is mortgage rates. In recent history mortgage rates were low, allowing more people to afford homes. For the last couple of years, economists have been saying that the Federal Reserve would raise their rates, which would naturally impact mortgage rates. However, due to a lackluster economy and low inflation, the Feds have delayed raising the interest rates. What this means for mortgage rates is that right now it is possible to get a 30-year fixed rate loan at a rock bottom price of no more than 3.75%.

Between the 1990s and 2008 the same type of mortgage loan price was much higher. Anticipation for this coming June is that the Fed will make a slight increase in their rates. However, real estate experts are not predicting any huge swings in the housing market over the next few months. The only worry they have at this time is the outcome of the November 2016 presidential election.

Jodi Bakst has been serving the Chapel Hill, Durham, Raleigh area for the last 20 years and was recently recognized as one of the 10 best of 2016 in client satisfaction, by the American Institute of Real Estate Professionals.